Positive signs from architects’ order books

26 January 2015

The German construction sector is growing at a slower pace than in recent years, according to a survey of European architects, but there are positive signs in the Netherlands and Spain that the hardest times are over.

The European Architectural Barometer, produced quarterly by Arch-Vision, found that the Netherlands and Spain showed improvement throughout the whole of 2014.

France and Italy are not recovering as fast as expected in earlier quarters, according to Arch-Vision, which said that this meant that many French and Italian architects had been struggling throughout last year.

The report is compiled from 1,600 architects in eight European countries, and Arch-Vision said it acted as a leading indicator for construction activities.

It said the UK market kept on improving, although at a slightly slower pace than expected in previous quarters.

One of the reasons for this was said to be that the building permits for residential building had decreased compared to the previous quarter. Non-residential building permits were more or less stable and all confidence indicators showed a slight decrease, with two out of three remaining positive.

Other indicators were said to be showing positive signs. For example, the sentiment within architectural firms was positive in the third quarter of 2014, and there was a strong order book and turnover development.

“Nevertheless,” said Arch-Vision, “there are signals that one should be careful about being too euphoric. The last three quarters clearly show a fair number of architects who expect an empty order book in the next 12 months – between 30% and 40%.

Arch-Vision, nevertheless, predicted modest market growth of 2% in 2014. It said that this would continue in 2015 with a further rise of 2%, and another 2% in 2016.

From the third quarter of 2010 onwards, there has been a steady positive development among German architects, according to Arch-Vision.

In the second half of 2014, both the German order book and turnover development were positive again, but the growth was smaller than the growth in previous halves, meaning that there were fewer architects seeing improvement in their order books and turnover.

“It is rather steady or slightly diminishing,” said Arch-Vision. “In the fourth quarter, only 5% of the architectural firms expect to see an empty order book in the next 12 months.”

There were, however, some indicators which might lead to some concerns, it said. Two confidence indicators – consumer and industrial – have slightly declined for two quarters in a row and the GDP growth rate was nearly zero in the third quarter – the latest available figures.

Therefore, Arch-Vision said it expected growth figures which were lower than expected in the first half – +1% in 2014, +1% in 2015 and +1% in 2016.

No improvement

The French construction sector was not showing any improvement, it said. There were many more French architects experiencing a decreasing order book – almost 50% in the past six months – than an increasing order book – approximately 15%. Arch-Vision said that in the latest quarter, the difference was the largest in recent years, and was even bigger than in the third quarter.

Falls in the order book and turnover development in the fourth quarter of 2014 were the largest since Arch-Vision started measuring, which it said highlighted the fact that the French situation was not improving.

Other indicators were also showing more downward trends, it said. Arch-Vision predicted that the French construction market would decrease in 2014 by 3% and in 2015 by a further 2%. It is not expected to recover before 2016 when it is predicted to stabilise.

In Spain, what had been predicted in the first quarter of 2014 was being confirmed in the rest of the year, said Arch-Vision. The continuous decrease has come to a halt, with results positive for four quarters in a row as more architects reported an increasing order book – at least 30%-plus every quarter, and the final quarter showing 41% – instead of a decreasing order book – not more than 25% every quarter.

Arch-Vision said that in every quarter of 2013, Spanish architects had been showing positive expectations, and this meant the bottom had been reached and improvements should follow.

Unfortunately, the more positive attitude is not completely in line with the developments in building permits, according to Arch-Vision. It said the permits for residential buildings showed a slightly positive trend in 2014, where non-residential showed a major drop 2014.

Arch-Vision said the next two years would show the road to recovery for the Spanish construction sector with a drop of 1% in 2015, and 0% in 2016.

After some very bad quarters in 2013, Italy experienced drops in order books and turnover development in 2014 as well, although not as bad as in 2013.

Arch-Vision said that in comparison to 2013, more Italian architects were noticing an increase in their order book during 2014. This, however, was only a small number compared to those who saw their order book declining. In the last three quarters, 50% of Italian architects reported negative developments in their order book and only 10% to 15% saw positive developments.

Arch-Vision said that although no data on building permits was yet available for 2014, the figures of previous years were not positive, showing big declines compared to 2010. It said this would have an influence on the construction in the two to three years after the building permits had been granted.

It felt that the outlook for the next 12 months, therefore, was still not very promising. Arch-Vision predicted a shrinking of the market by 8% in 2014, by 4% in 2015, and 2% in 2016. This comes on top of a heavy decline in 2013 of 11%.

Positive Dutch figures

For the whole of 2014, the Dutch order book and turnover development were positive, reported Arch-Vision. This was a continuation of the improvement seen in the last quarter of 2013.

The number of architects experiencing improvements – 52% – was the highest since Arch-Vision started the research. It said that currently, 19% expected an empty order book within the coming 12 months, which was one of the lowest percentages in four years.

The positive architectural sentiment could also be seen among other indicators such as building permits and most confidence indicators, it said. These showed a slight increase in comparison to the previous quarter. As a result, Arch-Vision predicted a small increase in 2014 of 1%, and further improvements in 2015 of 2% and in 2016 of 3%.

In Belgium, 2014 showed a stable positive development regarding the order books of its architects, said Arch-Vision. It found more architects reporting increasing order books of at least 35% in 2014, instead of decreasing – at most 25% in 2014.

It said only 11% of Belgian architects expected an empty order book. Although this remained the same as in the previous quarter, Arch-Vision pointed out that this was still a relatively low figure.

The building permits figures showed a big drop for both residential and non-residential. In total, together with relatively stable confidence indicators, this has led Arch-Vision to an unaltered prediction of the Belgian construction sector, which is one of a steady growth in future years, with a rise of 2% in each of 2014, 2015 and 2016.

After negative order book developments in 2013, Polish architects showed positive signs for the first three quarters of 2014. Arch-Vision reported that more architects showed increasing order books than experienced decreasing order books.

In the fourth quarter of 2014, however, Arch-Vision saw that the number of architects that experienced their order book growing was lower than the number who saw them declining. This was already foreseen in the third quarter, said Arch-Vision, since the number of architects that expected an empty order book within the next 12 months had increased from 14% to 24%.

Polish building permits showed a stable trend. Together, Arch-Vision expects that the Polish construction sector will fluctuate between €32 billion and €34 billion – up 2% in 2014, 2% in 2015, and 2% in 2016.

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